Why France can be attractive?A good example…

Laurence LAMOUREUX

Anne SERVANTIE

Louis BIZOUARD DE MONTILLE

Julien PARIS

Introduction

• France’s attractiveness : a current issue…– France occupied only the 30th position of the

last ranking issued by the WEF in November 2002.

– This fall seems to be due principally to such a heavy tax burden and also to high employers’ contributions. (i.e. high costs)

Introduction

Introduction

• However, some firms did settle successfully in France during the past few years.

• How did they manage to cope with the apparent economic drawbacks of France as a settlement place?

• Toyota has remained a case in point since it settled one of its factories near Valenciennes in 1998…

Plan

• The reasons why Toyota chose France

• The role of the French administration

• The obstacles the Japanese firm faced

• The results and the prospects of this settlement in France

Toyota’s position on the international market

• Third producer (after Ford and General Motors).

• Over 50 million vehicles produced per year in 25 countries.

• A 41 % market share in Japan, 8% in the US and 2.7% in Europe.

Toyota’s position on the international market

• Till recently, Japan has undergone harsh limiting quotas regarding automobile, especially in Europe and in France.

Since the 1980’s, Toyota has decided to settle in foreign countries in order to increase its sales limited so far by the quotas. It began with the US.

Why settling in Europe ?

• 8 years after the US, Toyota set shop in Great-Britain.

• Toyota decided to open factories in Europe in order to conquer this market that was under exploited so far due to the quotas.

• Toyota tries to be a both international and local player and to be as close to the markets as possible.

Why settling in Europe ?

• Toyota wants to be seen as a local producer and not as a foreigner, bound to import.

• Toyota’s market share in Europe is only worth 2.7% while Europe is the « continent of automobile ».

• The European market is unified and benefits from the single currency.

Toyota opted for a second factory in Europe.

Why opening the second factory in France ?

• 52 potential sites including Spain and Eastern Europe.

• Geographically, the heart of Europe.• The costs (spare parts and their transport as well as

that of Yaris cars which do not need to be imported from Japan).

• The cultural argument : the French automobile culture captivates Japanese managers.

Why choosing Valenciennes, then ?

• Geographically, the closeness to the British factory and to Brussels, where Toyota Europe Marketing and Manufacture is settled.

• Lower costs (parts manufacturers, infrastructures).• Life conditions of the Japanese expatriates.• Qualification and adaptability of the workforce. But also the cooperation of the French government

and the administration of the Nord-Pas-de-Calais region.

The French plant in Onaing (near Valenciennnes)

What did the French government do ?

• Historically, before the 90’s, France was not perceived as a welcoming country for the foreign direct investments :– a complex and hostile administration– a heavy tax system– a tendency to protectionism by setting up

quotas preventing importation

What did the French government do ?

• But, since the 90’s, that French attitude towards foreign investments has changed :– Communication campaign : « Japan, it’s

possible ! »– Nomination of a French ambassador specially

in charge of foreign investments – Action of various public organisations : the

DATAR, the local boards of trade…

Toyota decided to include France in its study of the possible new European sites for the plant.

What did the French government do ?

• A state financial support of 5 180 000 €• An intense collaboration before and after

the choice of Onaing :– The local organisations, such as the boards of

trade, allowed a very good circulation of the information during the study.

– Very good coordination between all the ministers when the Japanese leaders came to France to facilitate their choice.

– Nomination of two sub-prefects specially in charge of the plant building project after the decision was taken.

What did the French government do ?• France managed to give the evidence that the old

prejudices about French administration could be wrong !

• In exchange, Toyota made some concessions.

i.e.: In 1997, when he came to visit Mrs.Chirac and Jospin, Mr. Okuda, Toyota’s chairman and CEO, promised to adapt to the « local characteristics »…

The Minuses Toyota had to Face

• The new system of 35 hours a week:– Given Toyota ’s policy to adapt the

number of hours per worker to the market demand : a real need of flexibility.

– Given the fact that Japanese workers work 40 hours per week : a necessity to adapt the system to this new constraint.

The Minuses Toyota had to Face

• The problems linked to the labour force:– A training problem:

• given the level of commitment of Japanese workers.• given Toyota ’s willingness to have polyvalent

workers.

– The problems of trade unions: • given the number of trade unions ( if there is only one

trade union, like in Japan, it is easier for firms to use it as a medium in negotiations with workers)

• given French trade unions’ virulence

How did Toyota managed to soften those minuses?

• About the « 35 hours »:– through an agreement with the new

government: more flexibility allowed to adapt to the market demand in exchange of the engagement not to fire any worker.

– this constraint has been taken into account since the beginning in Toyota ’s strategic plan, as «  the 35 hours » where in Jospin ’s platform yet in 1997.

How did Toyota managed to soften those minuses?

• About training:– workers hire on their willingness to work in

team and not on their specific skills.– 6 months of intensive training in factories in

Canada, UK and of course Japan.– 130 team members who were trainers coming

from Japan.

A policy based on « on the job training »

How did Toyota managed to soften those minuses?

• To agree with trade unions: during negotiations with trade unions, Toyota highlighted its two pledges:

–Mutual respect, and thus the respect of the workers–Kaisen system, which implies that workers and managers work jointly to reach this continuous improvement

Last year’s good figures are encouraging

• Sales in Europe 866,351 units (+25%)

• Net sales in Europe 1 152 million euros

• Sales in France 68 018 units (+21%)

• Market share in France (3%)

Future in France• Will to develop French site of Valenciennes (up to

130 ha depending on the market evolution)• A new Yaris is about to come out• Partnership with Eléctricité de France to protect

the environment• Will to be respected and to have a good image in

Europe for a long term and a solid set up on the continent

Future in Europe

• Project of joint-venture with PSA in Check Republic

• 300 000 units production is planned in this country

• 100 000 units for each company

Conclusion• « We really wanted to become a recognized

actor of the European car industry instead of a simple marginalized importer. »

Mr. Hiromi SUZUMURA, vice-president of Toyota Motor Europe

• The French collaboration with Toyota’s managers allowed to make this possible.

This compromise is a way to offset the everlasting argument of too high costs against the settlement of a foreign firm in France.

Our sources…• A documentary from Arte : Gamble on the car

industry-Toyota : Analysis of a decision. • 2 interviews :

– Mr. Hiromi SUZUMURA, vice-president of Toyota Motor Europe

– Sophie GLEMET, in charge of communication for Toyota Motor Europe

• Lots of articles from press books (Le Monde, Le Figaro, Ouest-France, Libération, L’Humanité…)